Volatility systems taking a major hit today, How’s everyone doing, which system is working and which is not?
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Depends on your definition of “working”. My system got a little hit like expected but it´s working perfectly as it should. The more I trade it the more confidence I get in my backtest and the robustness of the system. So today´s loss is a gain for me personally. 
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My Battle Axe Volatility strategy ( https://collective2.com/details/110647445 ) switched from XIV to VXX midday, so it’s down for the day but not as far as it might have been as of this posting (3:30pm ET). Gotta expect some drawdowns when these funds will move more than 10% in a day quite easily. Agree with @Aaa123 overall.
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My strategy is up 15% since yesterday.
And my first subscriber who subscribed on 5/12/2017, has been up 20%+ for 3 trading days.
My Elite Vol Trader (intraday) strategy is up 9.4% MTD. We captured the move in VXX today (from open to close).
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I can understand some systems coming into the day being short volatility as the Trump thing was unexpected. However it doesn’t make sense that the systems don’t have a stop loss when trading a stock that can fall 30% in a single day. It’s crazy to let your system fall more than 10% in single day. Even if the system does better without stops in backtesting there should still be something to protect against total disaster. Theoretically XIV could fall even to zero in a single day.
Trading Volatility is in fact a risky game, but can be very rewarding.
To minimize the risk, I keep my trading style simple by selecting options carefully far enough OTM, based on a proprietary Quant Model with more than 99% probability of expiration OTM.
Short 20 calls on a 20K account leaves no room for a large overnight move. I understand the gamma play here but why not on an instrument that isn’t going to leave you with soiled trousers?
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There was actually a large overnight move yesterday in case you haven’t noticed…
Commission on those penny options cuts profits by 1/3-1/8 in most cases. Tail risk leaves your 3 cent calls worth $1. If that happens even in 1 week of 50 (after 1c/contract commission), you are break even for the year.
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And then consider the margin required to hold these positions, even for a day or so.
Thanks for your comments anyway, it is always interesting to listen to different opinions or views and I can’t agree more with one thing: keep enough margin available, only way to go through a large overnight move as we have seen recently.
Clem, although I may come across quite as quite pessimistic that is only a result of being burned enough times in this game. Your strategy performance will obviously speak for itself.
Can I ask why you don’t trade the system as TOS?
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I am pessimistic too, this is the only way to try to minimize risk, although I know that it will still be there and that nobody knows what will happen next.
Regarding the TOS feature, I am currently using for myself a Nasdaq stocks strategy which is relatively high frequency trading.
My plan by starting this Option strategy here on C2 is to allocate next year a portion of my account to it if I can afford to, but I wouldn’t think of trading only Options in an account, just maybe allocate 20% max of funds to it.
But even so, I am not sure I will use TOS, as I would like to be much more experimental in my own account than this simple strategy used in C2.
In my opinion, and in all the strategies I had worked on in the past, simple is best, as it will always better work in different and changing market conditions.
Curve-fitted strategies will always fail, and sooner than later.
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